Mortgage rates reach record lows, sparking refinancings USA Today
Mortgage giant Freddie Mac says 15-year fixed-rate mortgages averaged 3.5% this week, a record low, while 30-year fixed-rate mortgages averaged 4.32%, the lowest in nine months and near a record low.
Lower rates were only one bit of positive economic news Thursday. On Wall Street, the Dow Jones industrial average surged 423 points after the government said initial jobless claims fell to their lowest level since April.
Mortgage rates have been falling with U.S. Treasury rates, as investors buy Treasuries as a haven amid fears about the economy and the debt crisis in Europe.
While interest rates have been going down for three years, home sales have remained weak because of the dour economy. But refinance applications were up 30% for the week ended Aug. 5, putting them at their highest level of the year, the Mortgage Bankers Association says.
That refinancing will free up cash for some homeowners. The low rates are also likely to spur at least some home sales. But they'll do little more than "soften the coming hit" to home sales expected from the stock market's recent drops and weaker consumer confidence, says Mark Zandi , chief economist at Moody's Analytics.
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Will I receive a 1099 for a cash-out mortgage refinance?
I am refinancing my mortgage to consolidate debt. The current mortgate and HELOC are listed in the mortgage documents, but the other loans, ie credit cards, student loans are not listed and will be paid from the cash I receive at close.
Is the cash-out portion considered income that I will have to pay income tax on?
No, it is not income. It is a loan, which must be repaid. Hence no 1099.
Hope this helps.
Do I need to report the equity "cash out" from mortgage refinance as income?
I do my own taxes every year, but this year I have a question. I refinanced my mortgage in the spring. Had a significant amount of equity and decided to "cash out" some of my equity to help pay off some outstanding debts (car, student loan, credit card balance) and kept some to keep in saving (so it's accessible, if needed). I know the government tries to take a piece of everything, but this is MY money. It's not "wages" -- does that make a difference?
No.
You report equity on your home when you sell it. Then, you subtract your total costs from your home from the selling price to figure your profit on the sale. If you are single and have owned your home for two years or more, the first $250,000 is not taxable income. If you are married, the first $500,000 of profit is not. Any amount above and beyond that amount or if you have not lived in your home as your primary residence for more than two years, all profit is deductible.
The bottom line is that the money you received in the refinancing is additional borrowed money that was lent to you on the security of the original mortgage on your house. Taxable income does not include borrowed money except in the rare case when the debt is forgiven by the lender.
If you still really believe that the money you received in the refinancing is your money, and not borrowed money, try not paying it back to the lender and see what happens.
If I refinance my mortgage and "cash out" an additional amount, can I still deduct the entire interest?
Can I take the entire interest payment as a tax deduction? I was wondering since some of that interest is, in essence, not paying for the mortgage amount, but instead is paying for the cash out amount.
If you borrow against your house and you do not use the money to buy, build, or improve your house, this debt is called "nonacquisition debt."
Interest on nonacquisition debt is generally limited to the interest on $100,000 of such debt on your principal residence.
all you do is allocate. say you refinance for a total of $100,000 of which $10,000 is for a down payment on a car.
then you just don't claim 10% of what your bank statement says.
Refinanced mortgage, if cash is taken out is the rate different?
Eg. I want to refinance a 155K mortgage and 30K equity line into 185K fixed mortgage. If I take out 50K cash too, is the APR on the 50K cash the same as the 185 fixed mortgage?
Yes, a cash out transaction has a higher cost than a rate & term, or purchase.
Also: If that 30k equity line was taken out after the purchase and thus was not used to originally acquire the property, combining those loans into one new one is a cash out transaction even without the extra 50k.
in any event, your rate will be higher because of the cash out unless you at 70% LTV or less
LTV = $185,000/your value
Make sure to price out your loan with your LOCAL banks and mortgage brokers only.
A lot people giving advice on here are also looking to give you a loan (its not advice, its advertising), if they are not local to you and you can’t get to them within 1 hour don’t fall for it. They say they are licensed in all 50 states, what does that mean? Which state do you have to look in first if something goes wrong? KEEP IT LOCAL; DON'T GET RIPPED-OFF BY SOMEONE IN WHO KNOWS WHERE WHICH YOU WOULD HAVE NO DIRECT ACCESS TO.
Remember Buddha's advice:
"Believe nothing, no matter where you read it or who has said it, not even if I have said it, unless it agrees with your own reason and your own common sense." You are the only "expert" you can trust: All brokers, and every other loan officer guru giving advice here with a .com or contact me at the end is "selling" you something (its not advice, its advertising). Don't buy "it."
do i pay any taxes on a cash out from a mortgage refinance?
i want to refinance my existing mortgage and take out some cash do i pay taxes on the cash
You do not pay taxes on money borrowed as long as you pay it back.
In other words, if you draw money out of the equity on real estate to buy a car or take a vacation, the interest on that money is no longer tax deductible.
You do not have a sale.
http://taxipay.blogspot.com/2008/04/list-of-articles.html
Can I put all my Cash-out refinance's interests on Schedule E as mortgage interests?
I'm a 'passive' investor and own rental property A & B.
If I do a cash-out refinance on rental property A, can I write all my interests as mortgage interests to offset my rental income from propety A? Is there a limit? And if property A ends up as a loss, can I use it offset the passive income from property B? Is there a limit?
there are multiple limits of various kinds.
1st. if you cash out more from property A than your remaining equity in property A [original down payment or basis less accumulated depreciation plus capitalized items during your holding period less salvage received or loss deducted], the excess is taxable income in the year received.
Depending on depreciation recapture provisions, some or all of this may be ordinary income.
2nd. yes, all the interest paid on debts on Property A would go on Schedule E.
3rd. yes, the net loss on Property A [including depreciation] would offset the net income on Property B.
4th yes, there is a limit on losses from passive activites -- and a separate schedule on which to figure it out [see forms at irs.gov -- Limitation on Passive Activity Losses -- I think that's what it is called].
5th. points, costs, and fees paid to refi the debt on Property A probably have to be capitalized and amortized over the life of the new loan. [The loan statements will include them in the capital paid figure]. The similar remaining balance of points, fees, and costs that you are currently amortizing for the current loan on Property A are probably deductible as financing expense.
Atm, that's all I can think of...
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And that's all if you can find a cash-out refi of an investor property in the present loan market. My offhand guess is that you'll not be allowed to lower the equity to appraised value ratio beyond 20% at least -- possibly more depending on market. AND, I'll bet the lender will want an unconditional personal guarantee of the loan as well.
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Are you sure you don't want to hire an accountant to figure out this stuff??
I refinance my mortgage and cash out $150,000. Is it true that I only can deduct my interest up to $100,000?
http://www.irs.gov/pub/irs-pdf/p936.pdf
This advice was prepared based on our understanding of the tax law in effect at the time it was written as sit applies to the facts that you have provided. http://www.hrblock.com/taxes/tax_tips/index.html
http://www.hrblock.com/taxes/tax_calculators/index.html
Christine
It is itemized deduction. For your home property, even ff you don't itemize, you can still deduct up to $500 ($1000 on a joint return) of real estate taxes paid - there's a worksheet, and you add it to the standard deduction.
Read: http://taxipay.blogspot.com/2008/05/itemized-deductions.html
I have 65,000 left on my 30yr mortgage,but have no savings i can get back 25,000 in a refinance take cash out?
i would have a 90,000 mortgage with the same payment as now.im going to sell in a couple years anyways.if I refinance I get back 25,000 in cash.My house was appraised for 120,000.good idea not not?My payment would be the same.
Take cash out NOW on a refinanced mortgage or wait and borrow the money when needed?
My sister and her husband are going to refinance at 5.6% fixed. Should they also take out cash to cover future expenses (next 6 years) eg. new car, kids braces, emergencies etc.??
Cash-Out Refinance or Second Mortgage? If Second Mortgage...home equity loan or HELOC?
My 2-family home is valued at 375K. I have 12 years and 88K on it left. My current loan is at a 4.9 interest rate. I need to borrow 220K and need it in lump sum. With todays rates being around 6.5 for a 30 year, I know refinancing is out of the question. Which would be better for me, a HEL or a HELOC? What would my payments be for 30 years, 15 years? Thanks
look the best interest rate you will get is a fixed rate at 30 year if you can not afford this rate, you will get crushed with a home equity or other second note, they are variable and rates are not coming down but going up, after the teaser rate period is over you are going to get whacked almost double the payment, so when looking at a home equity read the fine print, see how long the teaser rate last and figure what ever your payment is double it once the teaser period is over